Here are two objects:
One just sold for over 100 million dollars and one is worth just over 30. Can you guess which is which?
If you pointed to the bronze chariot with the human figurine, you are both right and familiar with the sometimes strange world of art.
In economics we learn about opportunity cost and the downward sloping demand curve- and the logic behind it is pretty intuitive- why pay more for something when you can pay less? But that logic is contradicted by millions of dollars spent on luxury goods and services, even by those who might not be able to fit the purchase in their balance sheets at the time.
It’s all about what value consumers place on a product, and it’s up to the company to both control the consumer’s perception and take advantage of it. The article covers how the art museum controlled the perspective of the purchasers to sell the product- by using words like “gold” and “gilt” and that the sculpture is “a triumphant mark in history” and is unique (when it actually is one of six!)
For some companies, this route is not relevant. Walmart, with its cost leadership strategy (Porter), doesn’t have to convince its consumers that its products are “gold” and “gilt” and a “triumphant mark in history.” And it’s been working pretty well for them.
Sources: http://www.newyorker.com/business/currency/the-hundred-million-dollar-giacometti
http://www.ikea.com/gb/en/catalog/categories/departments/dining/21825/